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Gov?t, troika finalize reforms

Cabinet ministers were locked in talks with representatives of Greece?s foreign creditors until late on Sunday night, finalizing a controversial plan to dock the wages of thousands of civil servants ahead of their dismissal in a year and completing a draft budget for 2012.

By late Sunday there had been no official statement by the government on the exact nature of the scheme though sources indicated that auditors from the European Commission, the European Central Bank and the International Monetary Fund, known as the troika, had accepted a proposal by Finance Minister Evangelos Venizelos for the majority of the 30,000 civil servants slated to enter a so-called ?labor reserve scheme? to be aged over 60 and fulfil the criteria for retirement. The remainder will reportedly be drawn from dozens of state agencies due to be merged or abolished as part of broader cost-cutting reforms.

The ministry issued a written statement confirming that the Cabinet had approved the draft budget for 2012, which is to be presented in Parliament on Monday, and also confirmed that it would miss a budget deficit reduction target of 7.6 percent of gross domestic product set by the troika, with the deficit set to reach 8.5 percent of GDP this year. Even this goal is ambitious, the ministry conceded in its statement, noting that ?the estimate of 8.5 percent of GDP can be achieved if the state mechanism and citizens respond accordingly.?

The government is in a race against time to convince the troika that it will make good on pledges to put its financial house in order. Without the release of an 8-billion-euro installment, Greece could face bankruptcy and even an exit from the eurozone.

Former Socialist prime minister, Costas Simitis, said in an article published in Sunday?s Kathimerini that the risk of Greece exiting the eurozone was not an abstract one and called on the government to rise to the challenges, noting that the country only had until 2014 to secure its position in the euro family. ?There is a need for emergency procedures and an extraordinary effort,? he said. ?Greece has given its creditors the impression that it does not keep its promises, hoping that things will sort themselves out without the need for any major reforms,? Simitis noted in his article. He added that a possible return to the drachma in the event of a eurozone exit would create ?a panic.??

The decision on whether to release the next tranche of rescue funding to Greece - an 8-billion-euro installment - is to be made on October 13 at an extraordinary meeting of eurozone finance ministers but it will depend on troika officials issuing a positive report.